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Kimberly-Clark’s Sales Missed Estimates, Obtained Growth

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Sales compared to consensus

Kimberly-Clark’s (KMB) sales of $4.6 billion fell short of analysts’ estimate but returned to the growth trajectory due to improved volumes and favorable currency movement. During the reported quarter, Kimberly-Clark’s top line rose 1%, which reflected a 1% rise in volumes. Currency movements had a positive impact on the sales by 1%. However, lower pricing due to increased competition dented the sales growth rate. Organic sales rose marginally as lower pricing offset the improved volumes.

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Digging deeper

Kimberly-Clark’s volumes were impacted by persisting challenges in North America and South Korea. Low birth rates in the US (SPY) and South Korea hampered diaper sales and volumes. Weakness in China (FXI) due to increased competition from local players remained a drag.

Kimberly-Clark rolled back prices in Brazil and Russia due to the strengthening local currency, which impacted the sales more. Lower net selling prices due to increased competitive activity and soft category demand impacted the top-line growth.

However, increased promotions and marketing support combined with innovation-led products drove the company’s volumes. Kimberly-Clark’s high-end products generated higher demand in China, while volumes improved in Eastern Europe and Brazil. The sales in Argentina were driven by higher net selling prices offset by moderating category growth.

In comparison, Procter & Gamble’s (PG) fiscal 1Q18 sales rose 1.1% due to increased demand for premium offerings and pant-style diapers. Also, Clorox (CLX), Colgate-Palmolive (CL), and Church & Dwight (CHD) are projected to report higher sales during their upcoming quarters.

Outlook

Kimberly-Clark’s management expects 4Q17 sales to benefit from increased marketing and promotion support and planned brand activities. A favorable YoY (year-over-year) comparison and innovation could support sales growth. However, challenges in North America and South Korea could impact the company’s top-line performance. Increased competition could remain a drag.

Kimberly-Clark stood by its earlier guidance. The company expects its sales to remain flat or increase marginally in 2017.

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